What changed
RBI observed UCBs were using at-par cheque facilities from Scheduled Commercial Banks for their own use and for customers, including walk-ins. The circular now restricts this facility: UCBs can use it only for their own operations, for KYC-compliant account holders (with transactions of ₹50,000 or more debited to the customer's account), and for walk-in customers against cash for less than ₹50,000 per individual. UCBs must maintain detailed records of issuance and ensure sufficient balances with the commercial bank.
What it means for you
UCBs must tighten their internal controls on at-par cheque issuance to prevent misuse and align with KYC/AML norms. The ₹50,000 threshold for walk-in customers and mandatory 'account payee' crossing reduce the risk of anonymous transactions. Banks should also shift customers to electronic remittance methods like NEFT/RTGS to improve efficiency and compliance.
What you must do
- Restrict at-par cheque facility to own use, KYC-compliant account holders (with ₹50,000+ transactions debited to account), and walk-in customers for cash under ₹50,000 per individual.
- Maintain records of each at-par cheque issued, including applicant name, account number, beneficiary details, and date of issuance.
- Ensure sufficient balances or drawing arrangements with the commercial bank to honour at-par instruments.
- Cross all at-par cheques as 'account payee' regardless of amount.
- Promote and facilitate NEFT/RTGS for customers as more efficient remittance alternatives.
Who it affects
All Primary (Urban) Co-operative Banks, Scheduled Commercial Banks extending at-par cheque facilities to UCBs, Customers of UCBs using at-par cheque services
Can we still issue at-par cheques to walk-in customers?
Yes, but only against cash for amounts less than ₹50,000 per individual. For amounts ₹50,000 or more, the transaction must be debited to a KYC-compliant account holder's account.
What records must we maintain for at-par cheque issuance?
You must keep records of the applicant's name and account number, beneficiary details, and the date of issuance for each at-par cheque.
Are we required to cross all at-par cheques as 'account payee'?
Yes, the circular mandates that all at-par cheques issued by UCBs must be crossed 'account payee' irrespective of the amount involved.